451 advisors ireland special report (1)

IRELANDA Highly Attractive Location for Hosting Digital Assets

360° Research Report

SPECIAL REPORT

OCTOBER 2013

451 RESEARCH: SPECIAL REPORT© 2013 451 RESEARCH, LLC AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

451 RESEARCH: SPECIAL REPORT i © 2013 451 RESEARCH, LLC AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

ABOUT 451 RESEARCH 451 Research is a leading global analyst and data company focused on the business of enterprise IT innovation. Clients of the company — at end-user, service-provider, vendor and investor organizations — rely on 451 Research’s insight through a range of syndicated research and advisory services to support both strategic and tactical decision-making.

ABOUT 451 ADVISORS 451 Advisors provides consulting services to enterprises, service providers and IT vendors, enabling them to successfully navigate the Digital Infrastructure evolution. There is a global sea change under way in IT. Digital infrastructure – the totality of datacenter facilities, IT assets, and service providers employed by enterprises to deliver business value – is being transformed. IT demand is skyrocketing, while tolerance for inefficiency is plummeting. Traditional lines between facilities and IT are blurring. The edge-to-core landscape is simultaneously erupting and being reshaped. Enterprises of all sizes need to adapt to remain competitive – and even to survive. Third-party service providers are playing an increasingly flexible and vital role, enabled by advancements in technology and the evolution of business models. IT vendors and service providers need to understand this changing landscape to remain relevant and capitalize on new opportunities.

451 Advisors addresses the gap between traditional research and management consulting through unique methodologies, proprietary tools, and a complementary base of independent analyst insight and data-driven market intelligence. 451 Research leverages a team of seasoned consulting professionals with the expertise and experience to address the strategic, planning and research challenges associated with the Digital Infrastructure evolution.

© 2013 451 Research, LLC and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication, in whole or in part, in any form without prior written permission is forbidden. The terms of use regarding distribution, both internally and externally, shall be governed by the terms laid out in your Service Agreement with 451 Research and/or its Affiliates. The information contained herein has been obtained from sources believed to be reliable. 451 Research disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although 451 Research may discuss legal issues related to the information technology business, 451 Research does not provide legal advice or services and their research should not be construed or used as such. 451 Research shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpreta-tions thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.

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TABLE OF CONTENTS

SECTION 1: EXECUTIVE OVERVIEW 1

1.1 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . 1

1.2 KEY FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . 1

1.3 METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . 3

FIGURE 1: Assessment Methodology 4

SECTION 2: 360° COUNTRY ASSESSMENT: REPUBLIC OF IRELAND 5

2.1 ECONOMIC & POLITICAL STABILITY . . . . . . . . . . . . . . . 5

FIGURE 2: Evolution of the Digital Ecosystem in Ireland 6

2.2 TAX & FINANCIAL BENEFITS . . . . . . . . . . . . . . . . . . 7

FIGURE 3: Foreign Direct Investment in Ireland by Industry Sector 8

2.3 ENERGY & ELECTRICITY MIX . . . . . . . . . . . . . . . . . . 9

FIGURE 4: All-Island Fuel Mix 2012 10

2.4 LEGISLATIVE ENVIRONMENT . . . . . . . . . . . . . . . . . . 12

2.5 INFRASTRUCTURE COMPETITIVENESS . . . . . . . . . . . . . . 15

FIGURE 5: Snapshot of the World’s Submarine Cable Map, 2013 16

FIGURE 6: Dublin-Area Business Parks and the T50 Fiber Ring 18

2.6 HOSTING, CLOUD COMPUTING & BIG DATA READINESS . . . . . . . . 20

FIGURE 7: Ireland Hosting Revenue Summary

(451 Research Market Monitor) 21

FIGURE 8: UK/Ireland Hosting Breakdown


FIGURE 9: EMEA Hosting Breakdown (451 Research Market Monitor) 22

FIGURE 10: Ireland IaaS Revenue Summary


FIGURE 11: UK/Ireland IaaS Revenue Breakdown


FIGURE 12: EMEA IaaS Revenue Breakdown


2.7 LOCAL WORKFORCE . . . . . . . . . . . . . . . . . . . . . 26

2.8 GOVERNMENT SUPPORT . . . . . . . . . . . . . . . . . . . . 28

2.9 CASE STUDIES & SUCCESS STORIES . . . . . . . . . . . . . . . 30

APPENDIX 33

451 RESEARCH: SPECIAL REPORT 1 © 2013 451 RESEARCH, LLC AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

SECTION 1 Executive Overview

1.1 INTRODUCTION

Ireland is rapidly becoming one of the most attractive European destinations for organizations

that need to host digital assets to support their plans to service the EMEA region. The coun-

try’s location, its outstanding tax benefits, its international connectivity, its young and skilled

workforce, and its ‘green island’ approach – as well as its pro-business political and legislative

climate – collectively provide enterprises with a relatively low-risk and cost-effective location

to host their digital assets.

Ireland’s reputation as a technology hub has attracted some of the world’s most promi-

nent digital brands to host critical IT infrastructure in Dublin. With giants such as Google,

Amazon and Microsoft having already established significant hosting footprints in Ireland,

other IT firms are also seeing a competitive advantage in doing so. Many of these enterprises

use Ireland as a launching point for the delivery of a range of hosted services to the rest of

Europe and even globally.

GconnTec, an Irish information technology and interim management firm, has commissioned

451 Research to produce an independent report on the marketplace in Ireland. This report is

intended to provide an objective assessment of the attractiveness of Ireland as a hosting desti-

nation for digital assets – which include data, media, databases, applications and infrastruc-

ture services.

The intended audience for this report includes international digital-content and IP-centric

businesses that are planning to expand their operations into the European market.

1.2 KEY FINDINGS

• Ireland’s geographic location, as well as its EU and Eurozone membership, provide a

gateway to a European market of more than 500 million people.

• Ireland is a politically stable location. Despite the recent global financial crisis, unlike some

other EU countries, Ireland has experienced little social, industrial or political unrest.

• Ireland is now emerging from the financial crisis and is on course to exit its restructuring

program. A significant sign of recovery is that, as of August 28, 2013, 5-year Irish

government bond yields had dropped below 3% – compared with the near 18% seen during

the summer of 2010.

• To compete effectively in an increasingly commoditized business environment,

organizations need to get creative, and location selection can help in keeping a lid on

costs. The combination of a full package of tax benefits and access to energy-efficient

power contribute to Ireland’s overall attractiveness as a low-cost business destination.

2 IRELAND© 2013 451 RESEARCH, LLC AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

• Irish Government officials have been steadfastly committed to attracting foreign

direct investment by maintaining a low corporate tax rate, which has remained

at 12.5% since 2006 – much lower than in other European countries, including

the Netherlands, France, Germany and the UK. Besides the low corporate tax

rate, Ireland’s business-friendly package of tax benefits includes a research-and-

development tax-credit scheme, capital allowances on energy-efficient equipment, a

large number of signed double-taxation treaties, etc.

• Due to its temperate and windy climate, Ireland provides the ability to significantly

lower the costs associated with running a datacenter. In addition, Ireland has also

been aggressively exploring the use of renewable sources of power, which provide

cleaner and less expensive power options.

• In developed economies, the overall robustness of a country’s supporting ICT

infrastructure is a critical consideration when choosing a destination for hosting

digital content and services. Over the past 10 years, the Irish Government

and telecommunications providers have invested heavily in communications

infrastructure, linking the island to several destinations in Europe. There is also a

broadening array of transatlantic connectivity options for overseas organizations

considering Ireland as a European destination for their digital assets.

• Datacenter providers operating in Ireland have suggested that the latency between

Ireland and the UK is better than between Iceland and the UK, or even Scandinavia

and the UK. Google, for one, appears to be taking advantage of these low-latency

networks by hosting its Internet advertising services in Ireland.

• 451 Research estimates that the market for hosting services in Ireland will grow at a

CAGR of 18% through 2016. Ireland’s growth will outpace that of the UK and other

mainland Europe destinations, including France, Benelux, the Nordics and Iceland.

• Ireland is well positioned to service the growing demand for ‘big data’ and analytics

workloads. Its rapidly growing datacenter footprint, access to high-speed and

low-latency networks, and an increasingly skilled workforce are rapidly making

Ireland a favored destination for big-data and analytics activity. In addition,

the government is bidding to make Ireland a world leader in data analytics via

significant industry investment and collaboration in the areas of big data, business

analytics and smart cities.

• The Irish Government is pro-industry rather than pro-regulation, and it has

significant experience in dealing with multinationals. Ireland’s pro-business

legislative environment complies with all EU standards. This pro-business

government culture is receptive to companies looking to internationalize their

existing geographical footprint.

• Ireland offers strong skills in the ICT space. Its workforce is relatively young (the

population’s median age is the lowest in Europe), technology-savvy, multi-cultural

and multi-skilled.


• Ireland is a highly attractive location for hosting digital content and services for

international companies with plans to service the EMEA region. The table below

summarizes the results of our market assessment, with each area scored on a scale of

1 to 4 (1=Weak; 2=Average; 3=Encouraging; 4=Strong).

CRiTERiA SCORE

Economic & Political Stability 3

Tax & Financial Benefits 4

Energy & Electricity Mix 3

Legislative Environment 4

Infrastructure Competitiveness 3

Hosting, Cloud Computing & Big Data Readiness 3

Local Workforce 4

Government Support 4

Case Studies & Success Stories 4

TOTAL 32/36

1.3 METHODOLOGY

A number of internal and external experts contributed to this study. As the founda-

tion for the writing of this report, we initially relied on our proprietary data sets and

the knowledge of our subject-matter analysts. We then infused insight from a wealth of

local experts on topics ranging from datacenters and energy, through intellectual prop-

erty and data protection to talent and government initiatives. A significant amount of

the data used in writing this report was assembled through in-depth interviews with

various local subject-matter experts.

In writing this report, we began by identifying the key factors that drive destination

selection decisions and mapped those against Ireland’s capabilities. Research from The

451 Group shows that when making hosting location decisions, executives, to varying

degrees, take some mix of the following factors into account:

• Economic & Political Stability

• Tax & Financial Benefits

• Energy & Electricity Mix

• Legislative Environment

• Infrastructure Competitiveness

• Hosting, Cloud & Big Data Readiness

• Local Workforce

• Government Support

• Case Studies & Success Stories


We scored Ireland, on a scale of 1 to 4, on each factor that influences a company’s

decision when choosing a European location for their digital assets. Then we totaled

the individual scores to assess the overall attractiveness of Ireland as a destination for

hosting digital content and services. The assessment methodology is explained in the

figure below.

FIGURE 1: ASSESSMENT METHODOLOGY

KEY FACTORS:

• Economic & Political Stability

• Tax & Financial Benefits

• Energy & Electricity Mix

• Legislative Environment

• Infrastructure Competitiveness

• Hosting, Cloud & Big Data Readiness

• Local Workforce

• Government Support

• Case Studies & Success Stories

SCORING SYSTEM:

Weak = 1

Average = 2

Encouraging = 3

Strong = 4

SCORECARD RESULTS:

Unfavorable Location = 0-17

Average Location = 18-23

Good Location = 24-28

Attractive Location = 27-31

Highly Attractive Location = 32-36


SECTION 2 360° Country Assessment: Republic of Ireland

2.1 ECONOMIC & POLITICAL STABILITY

Republic of Ireland

The Republic of Ireland is an independent nation situated on the western side of Europe, occu-

pying about five-sixths of the island of Ireland. It shares its only land border with Northern

Ireland, one of the constituent countries of the United Kingdom. The Atlantic Ocean, the Celtic

Sea, Saint George’s Channel and the Irish Sea surround the country of Ireland.

Ireland is a Member State of the European Union, thereby subject to all the privileges and obli-

gations of EU membership.

IRELAND: KEY FACTS

TOTAL POPULATiON (2012 EST.) 4,589,000

TOTAL AREA 68,890 square km

LOCATiON Northwest Europe

CAPiTAL Dublin

MAJOR CiTiES (BY POPULATiON) Cork, Limerick, Galway

CURRENCY Euro (EUR)

LANGUAGE English and Irish

CLiMATE Temperate

NOMiNAL GDP (2012) $210.3 billion USD

PER CAPiTA GDP (2012) $46,176 USD

REAL GDP GROWTH (2011/2012) 1.4/0.2

AVERAGE CPi iNFLATiON (2012) 1.8

Sources: IMF, OECD and World Bank

Ireland is located between the North American and European continents. Its location is stra-

tegic, since it provides easy transport links to the US and EMEA. It is the only English-

speaking country within the Eurozone. This, along with its strong historical links and relative

proximity to the North American continent, at the surface makes Ireland an attractive location

for US-based companies with plans to expand their operations into Europe. (It is sometimes

said that “Dublin is closer to Boston than to London.”) In addition, Aer Lingus will resume its

direct flights between Dublin and San Francisco in April 2014, which will serve to strengthen

the links between Silicon Valley and Dublin’s cluster of technology companies.


The Irish Economy

Ireland is an easy country to do business with, in part because it possesses an open,

modern and globally connected economy. Its EU and Eurozone membership, along with

native English speakers, provides easy access to some of the largest and most developed

markets. It is a politically stable country, and unlike some other European countries, it

doesn’t have a tradition of social, industrial and political unrest.

The Irish economy is essentially a modern knowledge-based economy that focuses on

services and high-tech industries. It is dependent on trade, industry and investment.

Foreign presence is so significant in Ireland that Irish exports actually exceed the value

of the country’s GDP.

Ireland has a proven track record in attracting foreign investment dating back to the

1960s, and it is home to over 1,000 multinational companies.1 Since 2010, many high-

growth, ‘next generation’ businesses have set up operations in Ireland, including

EngineYard, Dropbox, Marketo and Twitter.

FIGURE 2: EVOLUTION OF THE DIGITAL ECOSYSTEM IN IRELAND2

Ireland is essentially a low-bureaucracy, low-tax and pro-business country. The latest

World Bank report on ‘Doing Business’ rates Ireland as the easiest EU location in

which to start a business and rates Ireland’s tax regime as the most business-friendly

in Europe. In terms of the overall ‘ease of doing business’ rank, Ireland is fifth in the

EU (after Denmark, the UK, Finland and Sweden) and seventh in the EEA. According to

Forbes’ latest ‘Best Countries for Business’ list, Ireland is sixth in the world and second

in the EU, after Denmark.

1. IDA Ireland: Ireland Update Q3 20132. Source: GconnTec

1970s 1980s 1990s 2000s 2010s


By some measures, Ireland has successfully emerged from the financial crisis of 2008.

During the crisis, unemployment rose to 15%, the state took over five of the six largest

banks, and the government was forced, in 2010, to secure a €67.5 billion ($87.5bn)

bailout to stabilize the economy. However, the ratings agency Standards & Poor’s

recently upgraded its outlook for Ireland from ‘stable’ to ‘positive’ because it believes

the general government debt burden is likely to fall faster than it had previously

expected. Another significant sign of recovery is that, as of August 28, 2013, 5-year

Irish government bond yields had dropped below 3% – compared with the near 18%

seen during the summer of 2010.

Domestic and commercial property prices have fallen significantly since 2008. Resi-

dential property is relatively inexpensive, and office costs have also come down. Prime

office rents were back to €307 ($410) per square meter in Q1 2013, from €673 ($898) per

square meter in Q1 2008.3 The Finance Act of 2013 introduced new real-estate invest-

ment trust (REIT) legislation in Ireland, which should have the effect of improving the

stability of the Irish property market by attracting fresh capital.

2.2 TAX & FINANCIAL BENEFITS

As mentioned in the previous section, Ireland’s favorable industry and tax policy has

strongly focused on attracting and retaining foreign direct investment (FDI) for the past

50 years or so. Ireland’s corporate tax strategy has three key pillars:

1. Rate – remain committed to a 12.5% corporate tax rate.

2. Regime – includes additional elements such as the R&D Tax Credit.

3. Reputation – transparency and full exchange of tax information

(i.e., double-tax treaties).

The ability to offer a full package of tax benefits has attracted many multinationals

looking to launch into Europe.

Corporate Tax Rate & FDI

Ireland is an open economy, supported by its corporate tax rate of 12.5% (compared

with 23% in the UK, 25% in the Netherlands, 30% in Germany and 33% in France). As

a result of these relatively low rates, Ireland has been attracting significant investment,

especially from US-based firms, and particularly those in the pharmaceuticals, IT and

communications, and financial services vertical markets.

Statistics from the Industrial Development Authority (IDA) of Ireland highlight show

there are more than 1,000 overseas companies now operating in Ireland. The IDA’s

statistics, illustrated in Figure 3, also show that top global companies from a wide range

of industry sectors have operations in Ireland.

3. CBRE 2013


FIGURE 3: FOREIGN DIRECT INVESTMENT IN IRELAND BY INDUSTRY SECTOR4

In a traditional FDI model, a foreign company would build a factory or business center in

a new location based on cost, incentives and proximity to markets. New technology now

enables companies to change their offerings, and the way they create, market and deliver

them. Collaboration between firms from different sectors and ‘co-opetition’ in the same

sector allow for the creation of new value, in terms of products and services and business

models. The Irish ICT sector is already leveraging this model; examples include Facebook

connecting with local application developers through its Developer Garage Program and

Google’s Code Jam, an international programming competition that engages top engi-

neering talent in all locations.

FDI in Ireland also takes the form of M&A activity, such as Intel’s purchase of Havok,

the Trinity College spinoff company that provides software and services used by digital

media creators in gaming and film. Other examples include Bloomberg LP acquiring

Irish software company PolarLake, and IBM acquiring Curam, an Irish software company

focused on social program management. Ireland is an M&A-friendly environment from a

legal and regulatory perspective. The vast majority of buyers are international firms, with

a large number of these from the US. The most active M&A sectors in the past two years

have been financial services, ICT, food and agriculture, aviation and healthcare.

R&D Tax Credit

Ireland has an R&D Tax Credit scheme that enables companies to claim a tax credit of

up to 25% of incremental qualifying expenditure on an R&D project. The purpose of this

scheme is to encourage both foreign and local companies in all sectors to innovate by

undertaking R&D activity in Ireland. This R&D credit can be offset against corporate tax,

or if the company is in a loss-making position, it can be received as a cash payment in

three equal installments over a three-year period.

4. http://www.idaireland.com/ida-files/docs/infographics/ida_fdi_v8.pdf

1 IBM’s Global Location Trends Report 20122 IMD World Competitiveness Yearbook 20133 OECD 20134 Site Selection 20135 Global Innovation Index 20126 World Bank Doing Business 20137 Eurostat 2013

Why Ireland?

1st best to Invest in Western Europe 4

6th ease of paying taxes 6

Ranks in top 10 countries in Global Innovation Index 5

Ranks in top 10 countries for ease of starting a business 6

Our tax/business regimeA wide range of Industry sectors are located in Ireland.

9 out of 10Global ICT corporations

9 out of 10Global Pharmaceutical corporations

3 out of 6Top Games companies

12 out of 15Global Medical Device companiesMore than

50%Of the world’s leading Financial Services Firms

Top 10 Top “Born on the Internet” companies

You'll be in good company - some companies who have made Ireland their home in Europe.

Significant improvements in cost environment - back to 2003 levels

Ireland is one of only 3 countries in the EU where nominal labour costs have fallen. 7

Increased cost competitiveness

in EU for completion of third level education 3

for flexibility and adaptability of people 2

in the world for availability of skilled people 2

for labour productivity 2

of 25-34 year olds hold a third level qualification compared to OECD avg of 38% 3

Our talent scorecard1st

1st

3rd

4th48%


Accelerated Capital Allowances

The Accelerated Capital Allowance (ACA) is an incentive for companies paying corpo-

rate tax in Ireland that aims to encourage investment in energy-efficient equipment. The

ACA allows companies to write off 100% of the purchase value against profit in the year

of purchase. The ACA covers 10 equipment categories (e.g., Information and Communica-

tions Technologies, Heating and Electricity Provision, Refrigeration and Cooling) and 52

technologies (e.g., wind turbines, blade servers, power management). The list of qualifying

technologies and products can be found on the website of Sustainable Energy Authority of

Ireland (SEAI). This ‘ACA-Specified List’ is updated on a regular basis.

Other Tax Advantages

In addition to overall corporate tax rates, multinational corporations’ key management and

technical staff (high earners) that are relocating to Ireland for a certain period of time also

get tax advantages.

In 2013, corporate tax measures were introduced to help small businesses, as part of the

10-Point Tax Reform Plan. These included reforming the three-year corporate tax relief

for startup companies to allow unused credits to be carried forward, and increasing the

amount of expenditure eligible for the R&D tax credit.

Double-Taxation Treaties

Double taxation can be an important obstacle to FDI. Double-taxation treaties are intended

to eliminate this double taxation and thereby increase foreign investment. Ireland offers a

transparent corporate tax regime and has signed 69 such double-taxation treaties. These

agreements cover direct taxes, which, in the case of Ireland, are income tax, corporate tax

and capital gains tax. Where a double-taxation agreement does not exist, there are provi-

sions in the Irish Taxes Consolidation Acts (TCA) of 1997 that allow unilateral relief against

double taxation for certain types of income. There are also reliefs granted under EU laws,

including the EU Parent-Subsidiaries Directive (90/435/EEC) and the EU Interest and Royal-

ties Directive (2003/49/EC).

2.3 ENERGY & ELECTRICITY MIX

Renewables and Alternative Sources of Power

The IT industry’s largest players have realized in recent years that they can cut millions of

dollars from their electricity bills by using fresh air to cool their servers, rather than power-

hungry and expensive air conditioners and chillers. Ireland can take advantage of its ideal

climate, in which the temperature rarely exceeds the upper ranges recommended for using

fresh air to cool a datacenter. The increasing cost of power is driving greater interest in this

‘free cooling’ approach and has helped Ireland build on its status as an attractive destina-

tion for major US technology companies.


Meanwhile, renewable sources of energy, such as wind and solar power, are becoming

an increasingly large portion of Ireland’s overall energy mix. The Commission for

Energy Regulation (CER) recently published a report on Ireland’s 2012 fuel mix and CO2

emissions. Ireland’s latest all-island fuel mix (which includes the Republic of Ireland

and Northern Ireland) is illustrated in Figure 4.

FIGURE 4: ALL-ISLAND FUEL MIX 2012

The use of renewable energy sources such as wind not only helps drive down the cost of

electricity, but it also contributes to the fight against climate change and enhances the

security of the energy supply. In the EU, renewable energy has become a fundamental

part of the energy-generation portfolio. In 2011, renewable energy accounted for almost

18% of the EU’s overall electricity consumption. The EU’s commitment to renewable

energy has found legal expression in a range of energy and climate-change roadmaps.

Ireland has committed to securing 40% of its energy from renewable sources by 2020,

while the overall EU target is 20%. The growth in renewable energy in Ireland is under-

pinned by a favorable policy and financial support framework, as well as capital invest-

ment in the required grid infrastructure. It is an extension of the country’s ‘green island’

image. The main renewable energy source in Ireland is wind. The Irish power grid

currently accepts up to 50% wind energy; this may grow to 75% by 2017, according to

experts. Ireland is also exploring other renewable energy sources, including how it can

harness the wave power of the Atlantic Ocean.

Dublin has emerged as a primary hub for server farms supporting the growth of cloud

services across Europe, and Microsoft, Google and Amazon have built powerful facili-

ties in the city. Dublin is unique among major European datacenter markets in that its

appeal is partly based on climate. While the top datacenter communities in London,

Amsterdam and Frankfurt are built on top of network intersections in key business

cities, Dublin has become a favored location for free fresh-air cooling, which is helpful

Coal

19.9%

Gas

47.7%

Peat

6.9%

Renewables

23.7%

Other

1.8%


in attaining low Power Usage Effectiveness (PUE) scores. PUE is a key metric for measuring

the energy efficiency of facilities. The temperate maritime climate of Ireland has relatively

cool summers and mild, relatively snow-free winters. The high-temperature average of 20°C

(68°F) and low-temperature average of 6°C (42.8°F) correlate well with the ASHRAE5 guide-

lines for the recommended datacenter operating range. As a point of reference, Dublin’s

maximum temperature hasn’t exceeded 28.7°C (83.7°F) in the last 40 years, which make it

an ideal location for free-air cooling.

In 2009 Microsoft opened its Dublin datacenter, investing $500m in the 51,000-square-

meter facility that uses fresh air to cool servers. In September 2013, Microsoft announced

plans to build its fourth datacenter in the Clondalkin area of Dublin. The new datacenter will

extend over 35,000 square meters. Microsoft said it had selected Ireland for the new data-

center largely due to climatic conditions and other strategic business considerations. In 2012

Google opened a $100m datacenter in Dublin’s Profile Park. Like the Microsoft facility, the

Google datacenter is optimized to use fresh air to cool tens of thousands of servers.

Ireland actually has the potential to become an energy exporter. It plans to export signif-

icant amounts of wind-generated power to the UK in order to help the country meet its

green-energy targets. The UK is struggling to build enough energy infrastructure to meet its

EU targets, and the two countries signed an agreement in January 2013 that commits them

to developing the financial and legal framework for energy trading. To facilitate this energy

trade, EirGrid, the national grid operator in Ireland, has installed a new east-west intercon-

nector cable linking the electricity grids of Ireland and the UK.

In addition to utilizing renewable energy sources, some large multinational corporations

are also considering investing in on-site energy generation in Ireland, by setting up wind

turbines on their factory and datacenter sites. According to energy experts, this could bring

down the cost of power by approximately 50% and would help stabilize prices. In addition,

there are many government incentives for companies willing to generate energy themselves.

In terms of the fuel mix for electricity suppliers in Ireland, Vayu stands out as an example.

The company, which supplies natural gas and electricity to the industrial and commercial

market in Ireland (as well as the UK and the Netherlands), uses only renewable sources and

now claims a carbon footprint of zero. This means that datacenter operators in Ireland have

the option of getting 100% of their electricity from renewable sources.

Electricity

Datacenters are typically large consumers of electricity. The Irish Government, with its

commitment to the increased use of cheap, renewable sources of energy, coupled with

private-sector activity, plans to significantly lower the cost of electricity going forward. In

the second half of 2012, business electricity prices (all taxes included) for the ‘ID’ and ‘IE’

bands of standard industrial consumption (annual consumption between 2,000 and 20,000

MWh, and 20,000 and 70,000 MWh, respectively) in Ireland were below the EU-27 and

5. American Society of Heating, Refrigerating and Air-Conditioning Engineers


Euro-area average. However, business electricity prices for a larger consumption band

referred to as ‘IF’ (annual consumption between 70,000 and 150,000 MWh; all taxes

included), were somewhat above the EU-27 as well as the Euro-area average.6

The cost of electricity in Ireland is relatively high due to the material investment

made in new power stations (e.g., wind turbines), the grid and big farms since 2000.

According to Ireland’s largest electricity service provider, Electric Ireland, for compa-

nies with an investment plan of 5+ years, Ireland will be a very favorable location when

it comes to electricity prices; the increasing significance of wind power generation

and the fact that no further capital investment is needed will bring the costs of elec-

tricity generation down. An advantage of wind power is that once the turbine has been

built, not much money is required other than for routine maintenance, which keeps the

overall cost of producing the energy relatively low.

In an effort to help drive down the cost of power in Ireland, the Electrical Supply Board

plans to spend €22bn, with the goal of increasing efficiency in electricity production,

while also furthering the deployment of renewable sources of energy. This is a sizable

investment from such a small country, and it provides ample evidence that Ireland is

committed to a strategy that can materially lower the cost of electricity over time.7

2.4 LEGISLATIVE ENVIRONMENT

Ireland has a pro-business legislative environment that complies with all EU standards.

Anecdotal evidence shows that in general, Irish regulations are strict enough to be

effective, but more pragmatic and flexible than the local laws in many other EU coun-

tries. The political climate is perceived as more pro-industry than pro-regulation.

Also, most regulators (e.g., the data-protection commissioner) in Ireland have experi-

ence dealing with US multinationals and are open to listening to what they have to say,

due to the significant presence of these companies in the country. Legislation requiring

the hosting of EU customer data within Europe has been a driver for US-based content

companies to choose to open up a European hosting location.

Data Protection

Using and processing data generated by commercial transactions, social media, Web

browsing, etc. are increasingly important for companies worldwide, and especially in

developed markets like the EU. Enterprises in Europe in particular are keen to know

where their data resides, and prefer to keep it as geographically close to the organiza-

tion as possible. These enterprises distinguish between different types of data. Salary

details, credit card numbers and confidential legal negotiations require different levels

of security and compliance than general background information about individuals,

work addresses, etc.

6. Source: Eurostat and Sustainable Energy Authority of Ireland7. http://www.esb.ie/main/sustainability/strategy-to-2020.jsp

http://www.esb.ie/main/sustainability/strategy-to-2020.jsp


The EU data-protection regime is one of the strictest in the world. The combination of the

EU Directive, which sets the minimum standards, and the respective local-country imple-

mentations of it, can be confusing and burdensome for small and medium-sized compa-

nies – and even for some multinationals – when they try to interpret it. The separation of

the ‘data controller’ and the ‘data processor’ roles, the rules on data transfers outside of

the European Economic Area, the robust anti-spam rules, and the right to access personal

data (subject access), among other things, can be very challenging to understand for

US-based organizations.

The current Irish law dealing with data protection is the Data Protection (Amendment) Act

2003, which is basically a direct local implementation of the EU’s Data Protection Direc-

tive. Ireland was one of the first countries to adopt and embrace the EU Directive. It is

also very similar to the UK’s Data Protection Act. The Irish implementation of the Direc-

tive provides more room for interpretation, however. Other European countries such

as Germany or France tend to scrutinize the rules more strictly. Germany’s interpreta-

tion of the EU standards is the strictest of them all. The Irish Data Protection Act is suffi-

ciently strict, but at the same time, it is pro-business. It aims to simplify the hosting and

processing of data for EU customers in Ireland.

Regarding the transfer of EU-based personal data to third countries – those outside of the

European Economic Area (EU Member States, plus Norway, Iceland and Liechtenstein) –

organizations in Ireland need to ensure that the country in question provides an ‘adequate

level of data protection.’ So far, the approved list of countries includes Switzerland,

Guernsey, Argentina, Isle of Man, Faroe Islands, Jersey, Andorra, Israel, New Zealand and

Uruguay. Canada and Australia have been approved for certain types of personal data

(e.g., advance airline passenger data).

In terms of data transfer to the US, the ‘Safe Harbor’ arrangement – a voluntary but

enforceable code of good data-protection practice, established by the US Department

of Commerce – has also been approved in order to facilitate transfers of personal data

to US organizations that have signed up to the arrangement. If an organization wants

to transfer data to a country that does not appear on the EU’s approved list, there are a

number of alternative ways in which an Irish data controller can ensure that the data-

protection rights of individuals are respected (e.g., via EU-approved ‘model contracts’).

Since 1995, data protection in the EU has been governed by the EU Data Protection Direc-

tive (95/46/EC). Last year, the European Commission proposed a reform, a General Data

Protection Regulation, to unify data protection within the EU under a single law. The

new law aims at protecting Europe’s data subjects, avoiding unnecessary burdens on data

controllers and processors, and promoting international harmonization by serving as a

model to follow globally. It also takes into account newer technology trends such as cloud

computing and social media.


The proposed regulation is currently at the European Parliament Committee, with

various amendments being tabled and debated (e.g., the controversial ‘right to be

forgotten’). Following a plenary vote in the Parliament, the legislation will pass to the

Council of Ministers. After that, three-way negotiations between the Council of Minis-

ters, the European Commission and the European Parliament will decide the final shape

of the new regulation. The goal of the European Commission is for the final regulation

to be adopted by 2014 and come into effect in 2016.

Intellectual Property

Intellectual property is becoming a key issue as more and more digital content is going

online. Service-provider and end-user organizations, as well as individuals, need to

know how to create, share, reuse and protect content without infringing the rights of

others. The exploitation, management and protection of intellectual property are impor-

tant for fostering and promoting innovation and creativity, as well as for business

growth and for improving competitiveness. In the digital age, these issues have become

more complex. Ireland has a high standard of IP protection and a good climate for

enforcement, including access to the Commercial Court for all IP disputes.

Ireland is a favored location for the development, exploitation and management of

intellectual property. Key drivers for this are the 12.5% corporate tax rate on trading

income, the 25% tax credit on the cost of eligible R&D activities, capital allowances on

the cost of acquiring certain intangible assets, and the double-tax treaties to facilitate

the flow of funds between Ireland and other countries. For instance, international IP

and associated licensing can be incorporated and royalties collected through Ireland, a

low-tax jurisdiction. This provides significant savings and more opportunities to exploit

IP internationally and create new revenue opportunities.

E-Commerce

All online businesses, whether they are actually trading online or not, are affected

by e-commerce regulations, since these cover more than just traditional e-commerce

activity. Every commercial website is covered by the Electronic Commerce (EC Direc-

tive) Regulations 2002. The EC regulations refer to “information society service,” which

is defined as “any service normally provided for remuneration at a distance, by means

of electronic equipment for the processing and storage of data, at the individual request

of a recipient of the service.”

The Irish e-commerce legislation is based on the EU Directive and contains a mix of

provisions related to electronic contracts, signatures, payments and disputes, and unso-

licited commercial communications, among other items. It also includes provisions

governing the liability of Internet service providers.

In July 2000, the Irish government passed the first e-commerce bill, which was less

legalistic and more business-focused than the UK’s bill; it enabled electronic signa-

tures, dealt with contract issues, and proposed a new regime for domain name regis-


tration. New regulations came into force in 2003 when Ireland implemented the EU’s

E-Commerce Directive. The new regulations provide for the free movement of ‘infor-

mation society services’ within the European Economic Area. These are services

provided online between one Member State and another. The bottom line is that service

providers that comply with the regulations of their own Member State do not have to

comply with the regulations for that service laid down by any other Member State to

which they might be supplying the service.

Another important e-commerce provision was the requirement for people sending

unsolicited commercial email (spam) to ensure that these messages are clearly identifi-

able by the recipient. The regulations governing unsolicited electronic communications

were updated in 2008, which included an increase in penalties and the creation of an

indictable offence in case of breach.

2.5 INFRASTRUCTURE COMPETITIVENESS

Connectivity

In the past 10 years, Ireland has made notable progress in broadband connectivity –

international connectivity, metropolitan-area networks and local access networks. This

is reflected in improved broadband availability and utilization over the past five years

(the number of broadband subscribers increased from 602,000 in 2007 to over 1.6

million in 20128).

In terms of broadband speeds, cable operator UPC increased the maximum speed avail-

able to residential customers to 150Mbps in 2012. Earlier this year, Eircom, the largest

telecommunications operator in Ireland, launched its new VDSL9 network, promising

speeds of up to 70Mbps.

Significant public-sector investment in telecommunications has contributed to ICT

becoming one of the fastest-growing segments within the Irish economy. ICT services

were Ireland’s largest export in 2010, valued at €28.2bn10, and the ICT sector is now

employing over 90,000 people11.

As illustrated in Figure 5, companies have a broadening array of choices for transat-

lantic connectivity, as well as access to diverse cable routes to the UK and continental

Europe.

8. Department of Communications, Energy and Natural Resources: A National Broadband Plan for Ireland9. Very-high-bit-rate digital subscriber line10. Central Statistics Office Ireland11. Action Plan on Jobs 2012


FIGURE 5: SNAPSHOT OF THE WORLD’S SUBMARINE CABLE MAP, 201312

US-Europe

Companies in Ireland have access to multiple transatlantic connectivity options.

Hibernia Atlantic – owned and operated by Hibernia Networks – is a high-capacity13

subsea cable linking Ireland directly to North America, with seven cable landing

stations in Ireland, North America and the UK. Hibernia Networks is also laying a new

transatlantic cable system, dubbed ‘Project Express,’ linking New York to London and

including a branching unit to connect with Ireland.

Emerald Networks’ new-build submarine cable system, ‘Emerald Express’ will connect

North America and Northern Europe. The route links Long Island/New York to Ireland.

The cable system is scheduled to be ready for service by mid-2014. It will be the largest

low-latency network across the Atlantic, featuring four fiber pairs designed at 100

waves x 100Gbps each, for a total of 40 T-bit.

12. Source: Magnum Opus Consulting (Ireland)13. including 10G LanPhy


Ireland-UK-Mainland Europe

Companies in Ireland also have a wealth of connectivity options when accessing the

UK and mainland Europe. There are 11 subsea cables connecting Ireland to the UK. The

newest and shortest one is CeltixConnect – owned and operated by Sea Fibre Networks

– with 72 fiber pairs supporting the highest-capacity lit services (up to 100 gig) and the

lowest latency.

Sea Fibre Networks is currently building another high-fiber-count cable system (48

fiber pairs) connecting Ireland with France. The new FastnetConnect is designed to

provide a highly reliable and scalable network from Ireland to France, and will connect

to multiple international cables – in the US and EMEA – at Bude (UK). Completion is

expected in 2014.

The global datacenter providers we spoke with as part of our research for this report

suggested that the latency between Ireland and the UK is better than between Iceland

and the UK, or even Scandinavia and the UK. This is important because the UK is one of

the largest content-consumer markets in Europe, and also the largest in terms of mobile

content consumption. Google, for one, appears to be taking advantage of these low-

latency networks by hosting its Internet advertising services in Ireland.

Dublin T50

Dublin’s T50 broadband ring (MAN) is a 44km multi-duct fiber-optic cable system

surrounding the city, owned and operated by Viatel (recently acquired by Digiweb). It

links all of the key business districts and business parks that are home to the various

datacenters, telehouses and multinational corporations, and ties into the transatlantic

cable system hubs in Dublin. The T50 carrier ring provides access to 27 international

carriers, plus direct fiber connectivity from Colt, Digiweb, BT, Viatel and euNetworks.

This kind of datacenter hub is unique in Europe.


FIGURE 6: DUBLIN-AREA BUSINESS PARKS AND THE T50 FIBER RING14

There are a number of global carriers in Ireland that offer multiple diverse routes on

and off the island. Providers include AT&T, BT, Cogent, euNetworks, Geo, Level3,

Verizon and Vodafone.

14. Source: Dataplex


Internet Exchange

Ireland’s Internet exchange association is INEX. It’s a neutral association, owned by its

members, that provides IP peering facilities for its members. The majority of content

providers are part of the INEX network, which also includes over 30 ISP, as well as

mobile and VoIP communication providers. Any Irish IP traffic passes through INEX.

INEX doesn’t provide backhaul, so it doesn’t compete with any of its members.

Like other European neutral exchanges (e.g., LINX, AMS-IX), INEX allows networks to

interconnect directly at no cost. The main advantages are related to cost, latency and

bandwidth. The neutral, nonprofit Internet exchange is an established model in Europe,

as opposed to the US, where Internet exchanges are commercial.

IP traffic in Ireland has shown exponential growth in the past few years. The yearly

average growth was 205% (193% for peaks) in 2011, and 240% (198% for peaks) in 2012.

The estimated growth for 2013 is 163% for the yearly average and 140% for peaks.15

Datacenter Footprint

Those looking to place their digital assets in Ireland have a plethora of datacenter

choices. Many of the huge cloud-scale providers like Microsoft, Amazon and Google have

built massive facilities in Dublin that are used to service Europe. In addition, Microsoft

and Google have both chosen to locate their European headquarters in Ireland.

In addition to being the capital, Dublin is Ireland’s largest city. It is also a major world

financial center and is the European base for many multinationals that contribute to

datacenter demand in the city. Internet heavyweights Google, eBay, PayPal, Yahoo

and Facebook all have their European headquarters or significant operational bases in

the city. According to 451 Research estimates, there are 15 multi-tenant datacenters

(MTDCs)16 in and around Dublin, with a total net floor space of 60,000 square meters.

MTDC providers in Dublin include Eircom, Digital Realty Trust, Interxion, SunGard and

TelecityGroup. Dataplex has recently opened a new datacenter in Dublin.

The datacenter landscape in the EMEA region is similar to North America in that it

consists of a combination of carrier-neutral colocation providers, managed hosting firms

that also offer colocation, telecommunications providers and real estate firms. The MTDC

market in EMEA represents 25.6% of the total global MTDC market. The top city markets

in EMEA are London, Frankfurt, Paris and Amsterdam. Dublin has also been pulling its

weight, and as previously discussed, has become a favored datacenter location for its

international connectivity and ‘green’ approach, and we believe it will continue to see

growing interest from datacenter providers.

15. INEX Traffic Statistics16. While enterprises can (and do) own their own datacenters, MTDCs are multi-customer facilities that are

normally owned by firms that specialize in providing Internet infrastructure services, including datacenter services, to customers.


Datacenter infrastructure is certainly viewed as a key component in a digital economy.

Demand from local corporate end users and telco providers has in part been responsible

for the growth so far, but more recently it is cloud computing and hosting that have

been driving market expansion.

The main markets that these datacenters are ultimately serving are in financial services,

digital media and content, online gaming, and e-commerce. The highest-growth markets

are those of digital media and content, and online gaming and gambling. Most of the

customers (approximately 90%) served by these providers are international, mainly US-

and EU-based companies.

2.6 HOSTING, CLOUD COMPUTING & BIG DATA READINESS

Hosting

Ireland has one of the most dynamic hosting markets in Europe. 451 Research esti-

mates that the market for hosting services in Ireland will grow at a CAGR of 18% over

the 2012-16 period, outpacing the expected growth in the UK and the overall growth in

Western Europe and EMEA.

Many international companies choose to ‘land’ in Ireland and spread out into Europe.

Most of the established companies in Ireland offer competitive services, and many have

a promising list of customers in other parts of Europe. Given Ireland’s proximity to the

UK and other European hubs, international Web and infrastructure hosters and managed

service providers – including GoDaddy, 1&1 and SunGard – are present, in addition to

the dozen or so domestic hosting companies such as Blacknight, Digiweb and LetsHost.


FIGURE 7: IRELAND HOSTING REVENUE SUMMARY17 (451 RESEARCH MARKET MONITOR)

FIGURE 8: UK/IRELAND HOSTING BREAKDOWN18 (451 RESEARCH MARKET MONITOR)

UK & iRELAND 2012 2013 2014 2015 2016 2012-2016 CAGR

UK $1,411 $1,630 $1,881 $2,167 $2,491

15% UK/I Share 92% 92% 92% 92% 91%

Y/Y Growth -- 15 6% 15 4% 15 2% 15 0%

Ireland $123 $145 $170 $200 $234

18% UK/I Share 8% 8% 8% 8% 9%

Y/Y Growth -- 17 9% 17 7% 17 5% 17 2%

Total UK & Ireland $1,533 $1,775 $2,051 $2,367 $2,725

15% W European Share 155% 153% 151% 150% 148%

Y/Y Growth -- 15 7% 15 5% 15 4% 15 2%

17. expressed in million USD18. expressed in million USD

18% 2012-2016

CAGR

2012 2013 2014 2015 2016

$123

$145

$170

$200

$234


FIGURE 9: EMEA HOSTING BREAKDOWN19 (451 RESEARCH MARKET MONITOR)

WESTERN EUROPE 2012 2013 2014 2015 2016 2012-2016 CAGR

DACH $2,178 $2,569 $3,022 $3,553 $4,175

18% W European Share 31% 32% 33% 33% 34%

Y/Y Growth -- 17 9% 17 6% 17 6% 17 5%

UK & Ireland $1,533 $1,775 $2,051 $2,367 $2,725

15% W European Share 22% 22% 22% 22% 22%

Y/Y Growth -- 15 7% 15 5% 15 4% 15 2%

France $1,091 $1,263 $1,459 $1,680 $1,931

15% W European Share 16% 16% 16% 16% 16%

Y/Y Growth -- 15 7% 15 5% 15 2% 14 9%

Benelux $675 $777 $892 $1,019 $1,160

14% W European Share 10% 10% 10% 10% 9%

Y/Y Growth -- 15 1% 14 7% 14 3% 13 8%

Italy $602 $679 $763 $857 $959

12% W European Share 9% 8% 8% 8% 8%

Y/Y Growth -- 12 7% 12 4% 12 2% 12 0%

Iberia $474 $517 $561 $607 $654


Y/Y Growth -- 9 1% 8 5% 8 2% 7 8%

The Nordics & Iceland $429 $482 $540 $605 $678


Y/Y Growth -- 12 4% 12 1% 12 0% 11 9%

Total W. Europe $6,983 $8,062 $9,289 $10,688 $12,283

15% Y/Y Growth -- 15 5% 15 2% 15 1% 14 9%

% of EMEA 79 3% 78 9% 78 5% 78 2% 77 9%

EASTERN EUROPE 2012 2013 2014 2015 2016 2012-2016 CAGR

Total $989 $1,161 $1,357 $1,582 $1,839

17% % of EMEA 11 2% 11 4% 11 5% 11 6% 11 7%

Y/Y Growth -- 17 4% 16 9% 16 6% 16 3%

ME & AFRiCA 2012 2013 2014 2015 2016 2012-2016 CAGR

Total $833 $995 $1,183 $1,401 $1,655

19% % of EMEA 9 5% 9 7% 10 0% 10 3% 10 5%

Y/Y Growth -- 19 5% 18 9% 18 5% 18 1%

Total EMEA $8,805 $10,218 $11,828 $13,671 $15,77616%

Y/Y Growth -- 16 0% 15 8% 15 6% 15 4%

19. expressed in million USD


Cloud Computing

Cloud adoption in Ireland is growing quickly. The results of a recent survey20 show that

50% of respondents are currently using some form of cloud services, with SaaS being

the most adopted model, followed by IaaS. The same survey concluded that the private

sector is currently driving most cloud adoption. However, the public sector is also

ramping up its adoption of cloud services, and the recent launch of the government’s

Cloud Computing Strategy effort may lead to significant growth in cloud adoption in

the public sector.

According to our research, the market for IaaS in Europe is expected to grow rapidly

through 2016. 451 Research Market Monitor estimates that the market for IaaS in

Ireland will grow at a healthy CAGR of 50% over the 2012-16 period – compared with

the 44% overall EMEA growth. In response to the growing demand for cloud services

in Europe, a number of US-based cloud providers are doubling-down on their European

investments.

International providers – such as Amazon, Google, IBM, Microsoft, HP and EMC – have

invested in building multiple datacenter facilities in Ireland, while others, including

Facebook and Yahoo, are planning new builds. Microsoft has invested an additional

$130m to expand its datacenter in Dublin, citing increased demand for cloud services

as a core driver. In 2011, Amazon acquired additional land in the Dublin area for the

expansion of its cloud operations.

Local cloud service providers competing in the Irish market include Digiweb, Cloud-

Strong and Host Ireland. SunGard made a significant investment with its new public

cloud offering, initially launched in Ireland. SunGard provides a broad array of cloud

and managed hosting services from Ireland, for customers across Europe.

20. Conducted by Deloitte Ireland in 2012


FIGURE 10: IRELAND IAAS REVENUE SUMMARY21 (451 RESEARCH MARKET MONITOR)

FIGURE 11: UK/IRELAND IAAS REVENUE BREAKDOWN22 (451 RESEARCH MARKET MONITOR)

UK & iRELAND 2012 2013 2014 2015 2016 2012-2016 CAGR

UK $159 $255 $366 $497 $641

42% UK/I Share 92% 92% 92% 91% 90%

Y/Y Growth -- 60 1% 43 7% 35 9% 28 9%

Ireland $14 $22 $33 $48 $69

50% UK/I Share 8% 8% 8% 9% 10%

Y/Y Growth -- 60 1% 48 6% 44 9% 45 3%

Total UK & Ireland $173 $277 $399 $545 $71042%

Y/Y Growth -- 60 1% 44 1% 36 6% 30 4%

21. expressed in million USD22. expressed in million USD

50% 2012-2016

CAGR

2012 2013 2014 2015 2016

$14

$22

$33

$48

$69


FIGURE 12: EMEA IAAS REVENUE BREAKDOWN23 (451 RESEARCH MARKET MONITOR)

WESTERN EUROPE 2012 2013 2014 2015 2016 2012-2016 CAGR

DACH $154 $257 $383 $541 $729

47% W European Share 25% 26% 27% 28% 29%

Y/Y Growth -- 66 2% 49 2% 41 3% 34 8%

UK & Ireland $173 $277 $399 $545 $710

42% W European Share 28 0% 28 1% 28 1% 28 2% 28 2%

Y/Y Growth -- 60 1% 44 1% 36 6% 30 4%

France $123 $198 $285 $388 $505

42% W European Share 20% 20% 20% 20% 20%

Y/Y Growth -- 60 1% 44 0% 36 4% 30 1%

Benelux $62 $98 $141 $191 $246

41% W European Share 10 0% 10 0% 9 9% 9 9% 9 8%

Y/Y Growth -- 59 3% 43 2% 35 3% 28 9%

Italy $56 $87 $122 $162 $206


Y/Y Growth -- 56 2% 40 4% 33 0% 27 1%

Iberia $25 $36 $46 $56 $64

27% W European Share 4 0% 3 6% 3 2% 2 9% 2 5%

Y/Y Growth -- 44 8% 28 9% 21 3% 14 4%

The Nordics & Iceland $25 $35 $43 $50 $55


Y/Y Growth -- 40 3% 23 7% 16 1% 10 0%

Total W. Europe $617 $987 $1,418 $1,933 $2,51542%

Y/Y Growth -- 59 8% 43 7% 36 3% 30 2%

EASTERN EUROPE 2012 2013 2014 2015 2016 2012-2016 CAGR

Total $41 $72 $113 $166 $233

54% % of EMEA 6 0% 6 5% 7 0% 7 5% 8 0%

Y/Y Growth -- 74 9% 56 4% 47 6% 40 4%

ME & AFRiCA 2012 2013 2014 2015 2016 2012-2016 CAGR

Total $27 $49 $79 $119 $169

58% % of EMEA 4 0% 4 4% 4 9% 5 3% 5 8%

Y/Y Growth -- 79 7% 60 0% 50 4% 42 7%

Total EMEA $686 $1,108 $1,609 $2,217 $2,91844%

Y/Y Growth -- 61 5% 45 3% 37 8% 31 6%

23. expressed in million USD


Big Data & Data Analytics

Many industry watchers, including 451 Research, forecast the ‘big data’ and analytics

market as an emerging growth area. Vertical markets like retail, financial services,

healthcare and telecom represent large and growing areas for big-data and analytics

technology. Business intelligence and analytics are nothing new, but the emphasis in

recent years on big data has placed unprecedented attention on the potential of enter-

prises to gather competitive advantage from their data. Specifically, the term ‘big data’

describes the realization of greater business intelligence by storing, processing and

analyzing data sets that were previously ignored because they were unsuitable for

storage and processing in traditional relational databases, due to one or more of three

factors: volume, velocity and variety.

Ireland is well positioned to service the growing demand for big-data and analytics

workloads. Its rapidly growing datacenter footprint, access to high-speed, low-latency

networks, and an increasingly skilled workforce are all making Ireland a favored desti-

nation for big data/analytics activity. Earlier this year, the Irish Government made an

initial €1m investment in a new Dublin technology center called the Centre for Applied

Data Analytics Research (CeADAR), and it is bidding to make Ireland a world leader in

data analytics. Top-tier multinationals such as eBay, Accenture, Dell and Fidelity Invest-

ments, as well as local ICT companies, will lead the research agenda of this new tech-

nology center.

The Irish Government has announced an education program that will see diploma and

master’s programs focused on next-generation management skills, jointly run by the

Irish Management Institute and University College Cork. IBM and Dublin City Univer-

sity have also worked together to create a new master’s degree program in computer

science, with an emphasis on big data, business analytics and smart cities. This program

is aimed at helping students develop advanced quantitative and technical skills to apply

analytics to real next-generation business problems.

Dublin has also become a ‘smart city’ testbed for IBM. The project involves applying

analytics to huge amounts of data in order to address traffic, water, energy and social-

care issues. IBM is using the city’s data to develop the smart-city concept; in return,

Dublin benefits from the latest ideas and the results of the work.

2.7 LOCAL WORKFORCE

Skilled Workforce

Ireland is strong in the ICT space, with respect to having a skilled workforce. Its prag-

matic education system and its language, as well as the presence of global top-tier

companies in the country, attract talent from all over the world. Its workforce is inter-

national, experienced, technology-savvy, multiskilled and multilingual. According to

the IMD World Competitiveness Yearbook 2012, Ireland ranks third for availability


of skilled labor, and gets first place for the flexibility and adaptability of its work-

force. OECD ranks Ireland among the 10 best-educated countries in the world; 48% of

25-34-year-olds hold a third-level qualification, compared with the OECD average of

38%.24

The EU’s Innovation Union Scoreboard assesses and rates countries in terms of employ-

ment in knowledge-intensive activities. According to its latest report, Ireland’s relative

strengths are in human resources and economic effects. One reason for Ireland’s success

with US multinationals is that Irish workers tend to thrive in the flat organizational

structures favored by these companies. It also helps that Irish managers are cultur-

ally equipped to maintain smooth relations with demanding superiors back at corporate

headquarters.

The Irish education system is more focused on developing broader, higher-value skills

that are applicable to real-world business situations, than on specific technical profi-

ciency. Ireland’s top universities engage in extensive research collaboration with

industry and government. For instance, while companies make use of research and

facilities, students and post-doctoral fellows gain insight, experience and jobs at these

companies. Ireland has also been heavily investing in educating a pool of talent specif-

ically aimed at serving the future requirements of IT companies. This effort is being

made in collaboration with private industry.

Initiatives such as Open Ireland (an advocacy and campaigning group) and Succeed

in Ireland (led by Connect Ireland) help attract talent and create jobs in the country.

Open Ireland, for instance, has called for the introduction of a ‘tech talent’ work visa to

reduce barriers to entry for technology professionals.

Furthermore, in an attempt to fight long-term unemployment, the government-led

Springboard Program provides places for unemployed people in a range of part-time

courses, from certificate to master’s-degree levels. Most courses last one year or less,

and are aimed at people who have previously been employed in construction, manufac-

turing or other sectors of the economy where employment levels are unlikely to recover

to pre-recession levels. Courses are offered in ICT, green economy, pharmaceuticals and

financial services, among other areas.

‘Young Ireland’

The median age of the population in Ireland is 35 years, the lowest in Europe.25 About

18% of Europeans are over 65, which places new challenges on developed economies.

With a relatively younger population (only 12% over 65), Ireland may have a bigger

proportion of the young skilled and educated workforce. (The US equivalent is approx-

imately 13.5%.) Ireland also remains an attractive place for young talent emigrating

from elsewhere in Europe, lured by the prospect of good jobs at global companies and

the opportunity to polish their English language skills.

24. OECD: Education at a Glance 201325. Eurostat: Population Structure Indicators, 2012


Labor Costs

Ireland is one of the three countries in the EU where nominal labor costs have fallen. Irish

hourly labor costs fell below the Euro-area average in 2011 and remained there in 2012.26

Social charges are generally high in Europe. In terms of labor costs allocated to employers’

social contributions and other labor costs paid by the employer, Ireland is among the coun-

tries that recorded the lowest share (of total costs). Sweden, France and Belgium recorded

the highest share. In Ireland, social contributions represent a meager 5% of GDP (second

lowest in the EU after Denmark), compared with an EU-27 average of 12.7%. Employers’ and

employees’ contributions are at 3.5% and 1.3% of GDP, respectively. Employers’ contribu-

tions amount to 10.75% of the salary, without any ceiling.27

2.8 GOVERNMENT SUPPORT

Ireland has a welcoming, pro-business government culture. There are plenty of government

agencies working on creatively attracting and supporting foreign companies doing business

in Ireland. Ireland’s business-friendly government culture is receptive to companies looking

to internationalize or expand their existing geographical footprint. Examples of these

government agencies are presented here.

IDA Ireland

IDA Ireland is responsible for attracting and developing foreign investment in Ireland. It is a

creative and dynamic organization aimed at developing sustainable relationships with over-

seas companies interested in investing in Ireland. IDA is very active in incentivizing multi-

nationals to locate their R&D and innovation centers in Dublin via funding and grants.

IDA Ireland has been attracting investment since the 1960s. It can assist companies with

information and statistics on key business sectors and locations within Ireland; setting up

businesses in Ireland; introducing potential investors to local industry, government and

research institutions; and giving advice on property solutions for international investors.

Since 2010, more than 60 high-growth companies have entered the Irish market with assis-

tance from the IDA and with the aim of scaling and internationalizing their operations.

Examples include PaaS provider EngineYard, job search engine Indeed.com, and SaaS

provider Marketo.

Enterprise Ireland

Enterprise Ireland is a government agency (its parent is the Irish Department of Jobs, Enter-

prise and Innovation) that helps Irish businesses succeed in international markets by

providing support to various commercial organizations – from entrepreneurs with plans for

a high-potential startup to large companies expanding their activities.

26. Eurostat 201327. Eurostat 2013


Enterprise Ireland client companies achieved record export sales of €16.2bn in 2012, with

substantial growth coming from the North America and Asia-Pacific markets. Enterprise

Ireland client companies established 383 first-time overseas presences and won 777 signif-

icant new international customers. High-potential startups secured 104 new international

clients with significant assistance from Enterprise Ireland.

Connect Ireland

Connect Ireland, with its ‘Succeed in Ireland’ initiative, is a great example of Ireland’s inven-

tiveness. If an individual introduces a company with plans to expand to Connect Ireland, and

this company creates jobs in Ireland, the ‘connector’ receives a financial reward, subject to

certain terms and conditions.

A recent success story is that of Mafic, a fiber manufacturing company that invested millions

of euros in a new production facility in Kells Business Park, Co. Meath, bringing 70 jobs to

the area over the next three years. The connector in this case was a local auctioneer, who will

receive a €105,000 ($140,000) reward for making the connection.

The Digital Hub

Located on a state-of-the-art campus in Dublin, The Digital Hub is a cluster of digital content

and technology enterprises founded by the Irish Government in 2003. The Digital Hub helps

local and international companies grow and find a ‘permanent home.’ It provides them with a

flexible space (for anywhere from a single employee up to around 80 staff), lets them test the

waters, points them in the right direction, introduces them to the right people, and gives them

legal advice. Since its launch, The Digital Hub has been home to about 167 digital content

and technology businesses. Amazon, for instance, started with three employees there.

The Digital Hub is a self-sustaining organization that reinvests its profit to grow the digital

content and technology business sector. The Digital Hub has partnered with the local St.

James’ Hospital to launch the Connected Health program, which supports digital product and

service companies in entering or expanding in the digital healthcare space.

International Digital Services Center

The International Digital Services Center (IDSC) provides multiple levels of support for compa-

nies of all sizes. It is an entrepreneurial environment that facilitates companies expanding

their international presence out from Ireland. It offers a smart package of services that

encompasses all the requirements companies may have when it comes to effectively global-

izing their businesses.

Irish Centre for Cloud Computing and Commerce

The Irish Centre for Cloud Computing and Commerce (IC4) is an industry-led research center

established in 2012 and located at Dublin City University. Its main goals are to foster innova-

tion and accelerate adoption of cloud computing through focused projects. It aims to bridge

the gap between research and industry. It is basically a consortium of researchers with back-

grounds in ICT, as well as business and legal issues.


2.9 CASE STUDIES & SUCCESS STORIES

In December 2012, cloud-based storage firm Dropbox announced it would establish its

international operations center in Dublin. Dropbox is a free service that allows users to

easily access and share documents, photos and videos from anywhere in the world.

This was Dropbox’s first move outside of the US. The new office will strengthen its ability

to provide technical support to the millions of Dropbox users worldwide. The investment is

supported by the Department of Jobs, Enterprise and Innovation through IDA Ireland.

The initial goal of Dropbox’s Dublin office is to hire multilingual sales teams, account

management and user operations staff, all of which will provide targeted support to

Dropbox users in Europe.

In 2003, Google opened its EMEA headquarters in Dublin, initially employing 100 people.

The Irish operation is now Google’s largest outside of the US, currently employing about

2,500 staff from 40 different countries. The local pool of multilingual, multicultural and

multiskilled talent allowed Google to build its EMEA HQ in Dublin.

In 2013, a year after announcing its plans to construct a €75m datacenter in Dublin,

Google opened the new facility at Profile Park in Clondalkin. Google said the facility would

provide employment for 30 people, with roles ranging from computer technicians, electrical

and mechanical engineers to catering and security staff.

This new datacenter will host computers to run cloud services, such as the Google search

engine, Gmail and Google Maps. According to Google, it will rank as one of the most

energy-efficient datacenters in the world, because it is taking advantage of Ireland’s

climate and is using an air-cooling system that eliminates the need for energy-intensive

air-conditioning equipment.

According to Google, Dublin has the right combination of energy infrastructure, devel-

opable land and available workforce for the datacenter. The company was able to take

the same approach to construction it did in Hamina, Finland, using local engineering and

construction expertise to redevelop an existing building.


In December 2012, Innovative Interfaces opened Innovative Interfaces Global Ltd., a wholly

owned subsidiary of its California-based parent company, in Dublin. Innovative Interfaces

creates tools that allow libraries in all sectors to succeed in a modern IT environment. It

supports thousands of libraries in over 50 countries.

The company has made a firm commitment to delivering support, development and hosted

services for the EMEA market out of its Dublin office. To that end, it has established a rela-

tionship with Interxion to support its datacenter needs.

According to Innovative Interfaces, in addition to benefiting from an excellent national IT

infrastructure, in Ireland it is possible to bring in staff with enhanced technical skill sets

because most of the leading global technology companies draw people to the country. There

are now 10 staff and seven different nationalities in the Irish office, with plans to expand

significantly this year.

LinkedIn established its international headquarters in Dublin in 2010. Mountain View, Cali-

fornia continues to be the company’s corporate headquarters, and Dublin is its center for

international growth. As the number of LinkedIn members was – and still is – growing

quickly, the company felt it was the right time to establish an international headquarters.

According to LinkedIn Europe’s managing director, being based in Dublin provides access to

a highly skilled workforce and enables the company to coordinate business growth across

Europe and beyond to deliver the best service to its members. LinkedIn also has offices in

London (since 2008) and Amsterdam (since 2009), as well as in Mumbai and Sydney.

Minds+Machines is a registry services provider, a subsidiary of Top Level Domain Holdings

(TLDH). Minds+Machines provides both front- and back-end registry services to new generic

top-level domain (gTLD) registries delegated to TLDH, as well as new gTLDs delegated to

third-party clients by ICANN as part of the new gTLD program.

The company says it chose Ireland because it is a known hub for leading technology compa-

nies, and the technology infrastructure is available at very competitive rates. There is a

skilled workforce available, and it’s strategically located between the US and continental

Europe. Minds+Machines also cites a high-standard data-protection law and a comprehen-

sive corporate tax regime.


Provider of the world’s number one CRM platform, salesforce.com, recently announced

plans to hire 100 professionals across sales, marketing, IT and customer support in

Dublin as part of its continued investment in Europe. Salesforce.com already employs

around 500 people in Ireland, and is looking to fill the additional 100 roles by the end

of this year.

The company also opened a second office at No. 1 Central Park. Its European regional

sales headquarters are located in Sandyford, Dublin 18. According to a salesforce.com

SVP, Ireland has played a key role in its success in Europe. IDA Ireland has worked with

salesforce.com on its development and employment expansion in Ireland since it first

established operations in Dublin back in 2000.

Cloud-based customer-service software platform provider Zendesk opened its Euro-

pean datacenter in Dublin earlier this year. The new facility gives Zendesk’s European

customers the choice to keep the data that Zendesk manages on their behalf within the

EU, as it aims to address the concerns of European customers over where their data

resides. Zendesk is processing and storing data in this new datacenter, but is also repli-

cating data through an EU-based backup provider.

Zendesk has more than 7,500 customers in Europe, including Just Giving, GOV.UK,

L’Oreal and Glasgow NHS. With this datacenter investment, the company plans to

increase its scale and global reach. It had already opened a development center in

Dublin in 2012.


APPENDIXThis report was authored by Csilla Zsigri (451 Advisors – The 451 Group), with contributions

from other members of the 451 Advisors team, including Sean Hackett.

The GconnTec Team (Garry Connolly, Pat Kearney, Willie Norse, Colum Traynor) provided signif-

icant insight into the realities of the Irish marketplace. Further external subject-matter experts

who were interviewed for or contributed in any way to this study are:

• American Chamber of Commerce Ireland – Brian Harrison

• Aran Islands Renewable Energy – Pat Gill

• Chirisa Investments – Connor Barry, John Quinn

• Connect Ireland – Michael McLoughlin

• Dataplex Ireland – Eddie Kilbane

• Deri Institute Galway – John Breslin

• Digital Hub – Edel Flynn

• Digital Realty Trust – Robert Bath, Bernard Geoghegan, Gary Keogh

• Digiweb Group – Alan Millett, Colm Piercy

• EirGrid – John Ging, Frank Groome, Jonathan O’Sullivan, Martin McCarthy, Claire Wallace

• Enterprise Ireland – Gearoid Mooney, David Scanlon

• Hibernia Networks – Fergus Innes, Martin Reilly

• Industrial Development Agency – John Bolton, Leo Clancy

• International Digital Services Centre – Neil Leyden, Linda Scales

• Internet Neutral Exchange Association – Barry Rhodes

• Interxion – Rachel Clynes, Tanya Duncan, Patrick Lastennet, Douglas Loewe, Ian McVey

• Irish Centre for Cloud Computing and Commerce – Tony McEnroe

• Irish International Business Network – Pat O’Carroll

• Irish Internet Association – Joan Mulvihill

• Microsoft Ireland – Clare Dillon

• New Morning IP – Fred Louge

• Open Ireland – Cathal Lee

• Sea Fibre Networks – Diane Hodnett

• Sigmar Recruitment – Adie McGennis, Barry Rudden

• SunGard – Stuart Edwards, Rob Thomson, Gary Watson, Simon Withers

• Sustainable Energy Authority Ireland – John O’Sullivan

• TelecityGroup – Sarah McCluskey, Maurice Mortell

• Tirna Partners - David Smith

• VigiTrust – Mathieu Gorge